1. Who’s
Next:
Fixing
The
Future

2. cover sTory
Succession planning is critical
for the CFO role. CFOs who have
mentored their successors or been
part of such programmes, discuss
why planning is so important and
talk about best practices
Tejeesh Ns Behl
joffy jose
W
HEN SK JOSHI, WHY INTERNAL
the much-respected SUCCESSION PLANNING?
Director of Finance, CFO succession planning, says S Dur-
Bharat Petroleum gashankar, Executive Vice President,
Corporation (BPCL), retired in August M&A, Mahindra and Mahindra, and
2011, Executive Director, Treasury, S former CFO at Mahindra Satyam, is
Vardarajan became the new finance crucial to ensure that relationships with
chief. As if on cue, his deputy took Mr the company’s stakeholders are not
Varadarajan’s old job. No recruiters destabilised. “If you look at the posi-
were called and no panic button was tion of a CFO, various people look up to
pressed. In a systematic manner, each him – the board, external shareholders
executive is groomed for the next job as and investors, all of them depend on his
part of the PSU petroleum giant’s suc- word and trust him to give a true pic-
cession plan. ture of the company’s financial health.
Examples of such seamless transi- So planning for a successor to the CFO
tions for the CFO function, however, is important to maintain continuity and
are few in India Inc. Exceptions such stability in fiscal management,” he says.
as Larsen & Toubro and Infosys, which Typically therefore, opine industry
have set benchmark standards in suc- leaders, a CFO should be groomed
cession planning, notwithstanding. from within the ranks, instead of
Thankfully, the importance of groom- foisting someone from outside the
ing internal candidates to succeed the organisation. As with the evolution of
CFO, is dawning on many Indian cor- the term, a CFO’s role too has evolved
porations today. Which is why board- over the years – from being perceived
rooms are increasingly beginning to as a glorified cost accountant to a
pay attention to the guardian of a com- fund manager for the company and
pany’s financial health, who occupies, a business partner to the CEO. The
what has become, the number two posi- next logical step was becoming part
tion in the corporate hierarchy. of the company’s business strategy
September 2011 CFO INdIA 13

3. cover sTory
formulation team.“A CFO is directly internal successor will value and under- groups, the sheer abundance of talent
involved in corporate governance, in stand much better than an outsider. means there are usually two to three
the US GAAP certification for instance, contenders for any C-suite position.
two CXOs are asked to certify the “There are examples like that of L&T,
financial statement, the CEO and the STILL EVOLVING Infosys and the Tata Group where
CFO,” Mr Durgashankar says. However, succession planning is succession planning always seems to
The self-certification, he elaborates, generally still an evolving science be clearly defined. Then there are some
indicates that the CFO takes respon- in India Inc, save for a few large large groups where the bench strength
sibility for wrongdoing if any. Con- business groups and organisations. is so good that at any point in time there
sequently, he adds, a CFO needs to Deepraditya Datta, Managing Director are one or two people who can step into
demonstrate strong ethics and set the of the Mumbai-based executive search the CFO’s shoes should the incumbent
standards – a benchmark which an firm Venator, says in large business leave,” he says.
But by and large, says Datta, whose
firm makes several CXO level hirings
for large and midcap companies every
year, most Indian companies do not
“Succession planning have any clear succession plan in place.
“Of course if they all had succession
requires a certain planning programmes in place, search
firms would go out of business,” he
degree of self- jokes. The trend however, is catching
on even in family-run firms, even if it
confidence in the means an external hire. He cites the
example of a recent hire his firm did
incumbent – how for a mid-size manufacturing firm.
“Their CFO is due to retire early next
secure he year. So in May they hired a deputy
CFO through us, so that the new joinee
feels to gets about eight months to work side
by side with the existing CFO and learn
groom his not just how the company’s finances
are run but why certain decisions were
successor” taken and who the important clients
and customers are.”
—S DurgaShankar, Mr Durgashankar points to another
executive Vice President, M&A,
Mahindra and Mahindra, and reason why the trend is still evolving in
former Cfo at Mahindra satyam India. Succession planning requires a
certain degree of self-confidence in
the incumbent – how secure he
feels to groom his successor.
“It took us 15 months to
correct all the back accounts at
Mahindra Satyam that included
6000 bank reconciliations. My
successor (Vasant Krishnan)
was working side by side with me
A.PRABHAKAR RAO
for the last three quarters of my
tenure. We ensured he knew every
aspect of the role he would take over
one day, before he actually stepped
into my shoes,” he recalls.
When such confidence is lacking,
succession planning often runs into

4. cover sTory
“Even at RCF, when we are
planning for succession,
a person is identified and
through the rotation system in
our company, he is provided
exposure in other areas to
update his knowledge”
Jiten GAndHi
—gautam Sen,
Director, finance, Rashtriya Chemicals & fertilisers
rough weather. “The person in the him exposure. A CFO does not just need act as a balancing partner to the CEO,”
job is often not interested in talking to know about the company’s financial he points out.
about succession, because he or she planning and strategy but also other Check and develop risk-taking
wants to stay there and doesn’t foresee areas such as marketing, operations, ability: This is where, opines Yogesh
leaving till he retires,” Sharon Allen, planned shutdowns and how much Dhingra, COO and CFO at Blue Dart,
Chairman of Deloitte & Touche, USA, effect it would have on the company’s a company’s finance honcho needs to
recently told the website cfo.com in profitability,” he says. have a calculated risk-taking ability and
an interview. An impending CFO job Teach him to say no when needed: he or she has to make sure this skill is
change would obviously jump-start the Potential successors, once identified, passed on to the successor over time.
process. But to formalise succession, should also pass a ‘managerial cour- “Most CFOs nowadays are also chief
says Ms Allen, the first step involves age test’, says Shailja Dutt, Managing risk officers of their companies and that
encouraging executives to think about Director of Stellar Search, based on her ability can only be honed if the CFO
what would happen to their companies interactions with several CXOs. This has a commercial sense of the business
if they couldn’t do their jobs for some trait is more pronouncedly required in of the company. When grooming a
reason. “People then start thinking a CFO, she says. “You don’t want the successor or potential successors, the
about the good of the organisation as CEO to run a company like a fiefdom,” CFO needs to help them develop a
a whole, rather than the protection of Ms Dutt says. Even so, more critical deep understanding of the company’s
their own position,” she says. than the courage to say no, is the abil- business,” he says.
ity to understand the business, feels SK It’s a team effort: More than being a
Joshi, former Director, Finance at oil purely functional head, a CFO needs
BEST PRACTICES marketing major BPCL. “A CFO needs to be able to manage people and be
Mentor the understudy: Ideally, says to remember that he may not be the top an energiser of talent and a business
Gautam Sen, Finance Director at Rash- guy but he has to work with that per- enabler, believes Mr Joshi. “At BPCL,
triya Chemicals and Fertilisers, under- son (the CEO) and there may be times being a public sector company, the
studies should be mentored for at least when a plan may not look feasible on task of appointing a successor is
two years before being elevated to the paper but could be imperative for the carried out by the Public Enterprise
CFO role. “Succession planning for any company’s long-term evolution in the Selection Board (PESB). However,
post requires identifying the person and marketplace. He needs to understand there is a corporate leadership pipeline
putting him through the paces to give the investors’ perspective as well and comprising senior staff of General
September 2011 CFO INdIA 15

5. cover sTory
Manager (GM) level and above, each of mechanism is in fact, one of the key Once a successor has been identified,
whom are monitored and reviewed by ways in which successors are identi- providing him with enough challenges
peers, subordinates and superiors on fied in firms across the world. Cen- to sustain his interest in the position on
their leadership style,” he discloses. In tral to this way of life is the rotation offer becomes imperative. “If you pick a
the finance department, there are five of high performers through different talented guy but put him in a job where
GMs and two Executive Directors (ED) jobs in and outside finance to broaden his intelligence is not fully utilised, he
and the final selection comes down to their perspective and expand their skill will leave,” Mr Joshi says. Recalling the
the EDs, which are below-board level sets. Rotations also help finance chiefs economic slowdown of 2008-2009, Mr
positions. In this case Mr Varadarajan assess whether their instincts about a Joshi says they formed a committee
succeeded Mr Joshi. particular employee are right. headed by his then deputy (and cur-
Use the rotational system: Agrees rent Director Finance, S Vardarajan) to
Mr Sen of RCF (who mentored his manage cash flows and they were able
successor in his previous assignment TACKLING to release funds to the tune of Rs 1500
as Director of Finance at Gujarat State EXPECTATIONS crore for working capital needs. Involv-
Fertiliser Corporation). Such planning, While hand-holding may not be ing the understudy in such a challenge,
he says, is not just left to the incum- required at that level, executives and helps him prepare for the job better.
bent CFO but is a joint planning by the management consultants agree that At the same time, succession planning
organisation. “Even at RCF, when we mentoring and ensuring that one is can mean losing talent. As soon as the
are planning for succession, a person transparent with team members about next CFO is identified, a company may
is identified and through the rotation expectations, is definitely needed. Both run the risk of creating consternation
system in our company, he is provided the CFO and the HR team, they say, among the other players one level down.
exposure in other areas to update his need to have their ears to the ground India Inc is full of instances where just
knowledge,” he reveals. The rotation and interact with younger talent within after a person had been identified for
the organisation to spot and nurture a CEO or a CFO position, a few of the
potential leaders. Mr Sen cites the other contenders left. The example of
instance of a young chartered accoun- ICICI bank where the appointment of
tant in his organisation, who despite Chanda Kochhar as MD led to an exo-
good reviews for his work, was stagnat- dus of the other top contenders from
ing in his career. “Since his growth was the bank, is fairly well documented.
not up to his recognised potential, we How does one address this chal-
discovered that he was not getting prop- lenge? Commitment to communica-
er exposure in different departments. tion, says the HR head of one of India’s
As soon as the problem was rectified, top manufacturing firms, helps retain
he started progressing,” he recalls. talent and defuse the tension that often
“If you pick a talented
guy but put him
in a job where his
intelligence is not fully
utilised, he will leave”
Jiten GAndHi
—Sk JoShi,
former Director of finance, Bharat Petroleum Corporation (BPCl)

6. cover sTory
accompanies succession planning. But
such communication, she says, “has to
be carefully managed”. The director
HR of a private bank, who did not want
to be quoted on record, added that one “Then there are some
needs to communicate not only with
the people who have been identified for large groups where
rotations, but also with those who have
not been included. the bench strength
is so good that at any
EXPECTING THE
UNEXPECTEd
point in time there
There is, of course, a chance that an
efficiently run succession plan will
are one or two people
go awry. What if the person being
mentored as CFO gets a lucrative offer
who can step into the
and quits? Tata Motors for instance,
was caught off guard when their
CFO’s shoes should
MD, Carl-Peter Fosters quit suddenly
in September 2011. Surprised by
the incumbent leave”
the departure, the company is now —DeepraDitya Datta,
Managing Director, Venator
conducting an internal and external
search for his successor.
But because such a surprise can
be a problem for a company, many
management teams plan for that
contingency. At some organisations in Of course not all finance teams can
India multiple candidates are groomed, so boast of such bench strength. At most
that if one leaves, another can take his or small and mid-sized Indian companies,
her place. For instance when the finance even rotation programmes can be dif-
department at a well-known pharma ficult to achieve simply because they do
company began its planning a few years not have enough senior level talent that
back, they found no one they could they can borrow from one department egates more responsibilities to his staff
identify as a possible successor. Now, after and put in another for a year. as necessary, so that if the CFO quits
three years of careful planning, there are So what should they do? Mr Sen or is on leave, at least the two next-in-
at least three people in line for the CFO says in such organisations employee commands can jointly handle the job
role, should the need arise, according to development is more informal. After till a replacement is found.
the HR head at the organisation. the CFO assumes new duties, he del- Developing a seamless succession
planning system is indeed easier said
than done and often is a time consum-
ing process. But companies with the
THE BLUEPRINT know-how and the willingness to imple-
ment such a programme, usually end
have a formal succession plan programme up better-off, not only in orderly tran-
Identify employees who have potential to handle responsibility and have talent sition and avoidance of outside search
Assign such managers a mentor such as the Cfo costs, but also in the retention of their
ensure such employees are posted for some time in another department or function, to top talent. As Mr Joshi says, having the
broaden his skill and understanding of the business support of a team of skilled and capable
Be prepared to manage and tackle the expectations that come once these employees colleagues always makes the CFOs job
realise they are being ‘groomed’ that much easier. Clearly, there is a lot
have a plan B ready in case a potential successor quits of wisdom in putting a succession plan
Communicate to both chosen ones and other candidates often, precisely, and discreetly in place for the top job in finance.
September 2011 CFO INdIA 17